Income Tax Act

Marginal note:Distribution by employee trust, employee benefit plan or similar trust

107.1 Where at any time any property of an employee trust, a trust governed by an employee benefit plan or a trust described in paragraph (a.1) of the definition trust in subsection 108(1) has been distributed by the trust to a taxpayer who was a beneficiary under the trust in satisfaction of all or any part of the taxpayer’s interest in the trust, the following rules apply:

• (a) in the case of an employee trust or a trust described in paragraph (a.1) of the definition trust in subsection 108(1),

  • (i) the trust shall be deemed to have disposed of the property immediately before that time for proceeds of disposition equal to its fair market value at that time, and

  • (ii) the taxpayer shall be deemed to have acquired the property at a cost equal to its fair market value at that time;

• (b) in the case of a trust governed by an employee benefit plan,

  • (i) the trust shall be deemed to have disposed of the property for proceeds of disposition equal to its cost amount to the trust immediately before that time, and

  • (ii) the taxpayer shall be deemed to have acquired the property at a cost equal to the greater of

    • (A) its fair market value at that time, and

    • (B) the adjusted cost base to the taxpayer of the taxpayer’s interest or part thereof, as the case may be, immediately before that time;

• (c) the taxpayer shall be deemed to have disposed of the taxpayer’s interest or part thereof, as the case may be, for proceeds of disposition equal to the adjusted cost base to the taxpayer of that interest or part thereof immediately before that time; and

• (d) where the property was depreciable property of a prescribed class of the trust and the amount that was the capital cost to the trust of that property exceeds the cost at which the taxpayer is deemed by this section to have acquired the property, for the purposes of sections 13 and 20 and any regulations made under paragraph 20(1)(a),

  • (i) the capital cost to the taxpayer of the property shall be deemed to be the amount that was the capital cost of the property to the trust, and

  • (ii) the excess shall be deemed to have been allowed to the taxpayer in respect of the property under regulations made under paragraph 20(1)(a) in computing income for taxation years before the acquisition by the taxpayer of the property.